Page 49 - Policy Economic Report_Mar'25

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

It emphasizes efficient alternate dispute resolution mechanisms which will ensure disputes can be
resolved in a timely, fair and cost-effective manner.

To promote enforcement of the provisions of the Act, penalty has been increased to 25 lakh rupees and
upto 10 lakh per day for continuing infraction so that they have deterrent effect. To make the system
effective and expeditious, the Bill creates an adjudication authority and an appellate mechanism for levy
of penalties.

Sh. Puri emphasized that the Bill intends to maintain cooperative federalism and does not impact the
rights of the States in any manner. The States will continue to give Petroleum leases, necessary statutory
clearances and receive royalties, as before. Minister emphasized that with the passing of the Bill, the
provisions will improve the “Ease of doing business”, make India an attractive destination for production
of oil and gas and play an instrumental role in unlocking hydrocarbon potential of our resource rich
nation.

No windfall tax on oil companies after new law: Hardeep Singh Puri

Oil and gas companies will not face any new taxes like the windfall profits tax after the coming into
effect of a new law that promises stability of fiscal regime, Petroleum Minister Hardeep Singh Puri said.

Parliament has passed the Oilfields (Regulation and Development) Bill, 2024 that provides policy stability
to investors, decriminalizes provisions and promotes ease of doing business.

"After this bill, it will be difficult to levy (new taxes like) windfall tax because somebody will sue us (for
failing to keep the promise of fiscal stability)," he said at a reception he hosted to celebrate the passage
of the bill.

Investors looking to invest in finding and producing oil and gas want fiscal stability, and new taxes that
seek to take away gains made when prices are high, without compensating for low or no margins when
rates are low, are often a deterrent.

India imposed a windfall profit tax on July 1, 2022 joining a growing number of nations that tax super
normal profits of energy companies. At that time, export duties of Rs 6 per litre (USD 12 per barrel) each
were levied on petrol and ATF and Rs 13 a litre (USD 26 a barrel) on diesel. A Rs 23,250 per tonne (USD
40 per barrel) windfall profit tax on domestic crude production was also levied.

The tax rates were reviewed every fortnight based on average oil prices in the previous two weeks. The
levy was scrapped in December last year after 30 months. Puri said global oil majors have been exploring
investing in India.

Brazil's Petrobras is in discussion with state-owned Oil India Ltd for exploring the Andaman basins, while
Oil and Natural Gas Corporation (ONGC) is engaged with majors like ExxonMobil and Equinor for
collaboration in deepwater exploration.

The new legislation "creates conditions for all of them (international oil companies) to come and look at
India," he said.

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